Houston-based Lillian Nicola Asset Management have designed a diversified forex strategy which performs the primary function as a discretionary, directional trading methodology which enters and disposes of currency pairs within the spot forex market.

The company is a 4.7 exempt NFA Member Commodity Trading Advisor (CTA) which was founded by Alessandro Torre and Steven Wendlandt in May 2012 and provides managed forex programs to its clients.

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The functionality of the program is intended to capture price trends lasting anywhere from 2 weeks up to 6 months within these markets. The program utilizes a trading approach based upon the tenets of chaos theory, Elliot Wave theory, fractal geometry and price momentum. Positions are scaled into by using a reverse pyramiding technique in attempts to reduce volatility risk as the most risk on any position exists before a trend has been established by price movement and time.

As an off-exchange forex investment strategy, it is aimed at obtaining high risk-adjusted returns while bearing in mind the protection of investor capital against adverse volatility using a discretionary methodology.

There are four categories by which the tenets of the strategy are defined by LNAM:

Non-correlated Investment – This provides an added layer of portfolio diversification with minimal correlation to other investments.

Risk Management – Risk control is achieved through static and dynamic parameters whilst adhering to managing correlation risk.

Liquidity Advantage – Spot forex markets offer sufficient market depth and liquidity to adjust positions quickly without detracting from performance.

Tax Advantage – The United States IRS treats returns from these investments favorably under section 1256. This works out at 60% long term and 40% short term capital gains. There is some consideration as to whether Congress may amend this in the future however.

“Our goal,” says Lillian Nicola’s co-founder and principal Alessandro Torre, “is to obtain consistently high risk-adjusted returns when compared to other managers in the currency and managed futures space.”